Getting the message
The latest tie-up between messaging apps and broader online firms
IN THEORY Daum, an internet portal in South Korea, is acquiring Kakao, a startup whose messaging app, KakaoTalk, is on most of the country's smartphones. In practice, it is the other way around: the merger unveiled on May 26th gives Kakao's shareholders the lion's share of the new company, although Daum has more revenue, profits and staff, plus a stockmarket listing. The deal, valuing Kakao at $3 billion-odd, shows that messaging apps are still hot property.
Hottest of all is WhatsApp, a Silicon Valley startup with 500m users, which Facebook bought in February for a staggering $19 billion in cash and shares.The same month Rakuten, a Japanese internet firm, paid $900m for Viber, founded by Israelis but based in Cyprus. Alibaba, a Chinese online giant, paid $215m for a slice of Tango, another Silicon Valley firm, in March. Tencent, Alibaba's rival, owns WeChat, which has almost 400m users. It also runs QQ, an older messaging service, and has a stake in Kakao.
The South Korean deal means yet another pairing of a broader internet company and a messaging startup. The youngsters seek extra heft—for instance, like Kakao, in marketing. The oldies get a trendy mobile product. Daum doubtless hopes that KakaoTalk, which is installed and registered on 145m devices, will help it combat Naver, South Korea's leading portal. South Koreans do not just use the app to chat: it is also a popular platform for mobile games, from which Kakao makes most of its money, and for sending both digital and physical gifts. Naver, too, owns a messaging app, Line, with 400m users, but it is based in Japan.
The market is highly regionalised: most friendships are local, after all. Kakao has been trying to break out of South Korea, where it is running out of room. It is concentrating on Indonesia, Malaysia and the Philippines, but it faces stiff competition from Line and WeChat. Which app if any will conquer the globe is an open question—though WhatsApp, with most users and Facebook's billions, looks the most powerful. Perhaps none will. People may end up using several—as they did with desktop messaging services in the internet's first wave.